Office rents in Hong Kong’s Central, the most expensive in the world, will only go up even amid exodus, says district’s biggest landlord

Office rents in Hong Kong’s Central district, already the world’s most expensive, are likely to remain sky high even as more firms are moving out of the city centre in search of cheaper accommodation.

That’s according to Raymond Chow, executive director for commercial property at Hongkong Land, Central’s largest office landlord.

“Hong Kong is Asia’s key financial centre, and Central is still the city’s most important financial district,” he said.

Still home to the city’s most influential institutions such as the Securities and Futures Commission, The Stock Exchange of Hong Kong and Hong Kong Monetary Authority, Central’s connectivity remains a magnet for leading players, he added, in a way that other districts cannot compare.

Hongkong Land is London-listed and ultimately controlled by the UK-based Keswick family, one of Hong Kong’s oldest property dynasties.

It remains the largest landlord of commercial properties in Central, with a powerful portfolio of grade A buildings such as Alexandra House, Chater House, and One, Two and Three Exchange Square. Collectively its roll-call of sites accounts for a fifth of commercial space in the area, with a value running into billions of dollars.

“Our vacancy rate is just 0.6 per cent,” said Chow. “We haven’t enough space, and so rents will only move up further.”

In June, Central was ranked the world’s most expensive office location for the third year by global commercial real estate firm CBRE, thanks predominantly to strong demand from mainland tenants.

Office space there now costs US$306 per square foot, 30 per cent higher than the second highest area, London’s West End at US$235 per square foot.

But while still filling the coffers of the larger owners, the spiralling rents are in turn hurting the city’s appeal as a technology centre compared with cities across Asia, according to a separate report from Colliers last week.

Hong Kong now trails in eighth place behind, in order, Bangalore, Singapore, Shenzhen, Beijing, Shanghai, Seoul and Hyderabad, as a regional tech hub.

The soaring rents have prompted some tenants, including investment banks BNP Paribas and Goldman Sachs, to move some business functions to cheaper locations, while retaining head offices in Central.

But Chow adds that “90 per cent of our tenants have renewed contracts in the past 18 months. There are about 140 law firms in Central, and half of them are our tenants”.

That client list includes law firm Mayer Brown, the anchor tenant of Prince’s Building, which has been in there since early 1980s.

Its senior partner Terence Tung, said staying in Central “helps us attract and retain our employees, who value the convenience as well as the connectivity provided by the district”.

Denis Ma, head of research at JLL’s Hong Kong office, also believes Central will retain its crown as the world’s most expensive office rental market, as supply tightens and vacancies remain low.

“Rents in Central will continue to rise,” he added.

Hongkong Land‘s Chow said the company has been upgrading its office portfolio to meet the increasing technical demands now needed within modern office space and designates lifestyle or yoga spaces for tenants concerned about quality of life.

In its retail property portfolio, Hongkong Land has launched “CODELAB” in the Landmark shopping mall – pop-up stores that sell different international brands.

“You can go into it and ‘feel’ the actual products on offer,” Chow said.

“You can take photos, pay online and products will be delivered to you.”